Producers and utilities last week registered strong protests toTrunkline Gas Co.’s proposal to spin down 720 miles of its 26-inchdiameter natural gas mainline to an affiliate, saying that whilethis action may be in the pipeline’s best interest it’s not “in thepublic interest.”

“The basis for Trunkline’s application is that there is anexcess amount of pipeline capacity serving [its] market areas, andthat this excess capacity has forced Trunkline to heavily discountits transportation services,” said Indicated Shippers, a group ofsix major and independent producers. Trunkline contends thesituation will only worsen in the years ahead.

The “applicable standard” for whether FERC should approveTrunkline’s proposed abandonment is not whether it’s “potentiallyprofitable” for Trunkline and its affiliate, CMS Trunkline PipelineHoldings Inc., but rather whether it’s in the public interest, theproducers said. “A transfer at less than market value is not in thepublic interest, particularly given the detriments of abandonmentto shippers.”

Northern Indiana Public Service Co. and Northern Indiana Fueland Light Co. agreed, saying Trunkline’s proposal was inconsistentwith the “public convenience and necessity” standard under Section7 of the Natural Gas Act [CP00-114]. And Memphis Light, Gas andWater doesn’t think the situation on the 26-inch Line is as bad asTrunkline portrays it.

“…..[I]nformation provided by Trunkline establishes that itscontract levels have been increasing over the last five years and,absent action by Trunkline, there is no indication that theselevels will decrease.” Also, as a result of its recent rate case,”the need to provide discounts will be significantly decreased,”the gas distributor said.

Trunkline proposes to spin down the line to another subsidiary,CMS Trunkline Pipeline Holdings, that plans to use it to transportethane and other hydrocarbon vapors to the Gulf Coast from the AuxSable Liquid Products processing plant, which is under constructionat the terminus of Alliance Pipeline. The 26-inch line stretchesfrom Longville, LA, to Bourbon, IL.

Trunkline seeks to transfer the 26-inch line to CMS Holdings atnet book value, which it estimated at about $10.2 million. A newventure company, which would include CMS Holdings and otherentities, would reimburse Trunkline for the costs associated withthe abandonment of the line and for reconnecting existing customersto the mainline (an estimated $10 million). The transfer of theline would reduce the mainline market capacity of Trunkline’ssystem by 255 MDth/d, or 14%, to 1,555 MDth/d. Trunkline said itwould slice its annual cost of service by about $3.3 million, whichsome critics believe is an overestimation.

“This means that under the proposed abandonment, ratepayerswould be trading a 3.2% reduction in cost responsibility in returnfor a 14% reduction in pipeline capacity. This arrangement wouldnot serve to alleviate the burden on shippers attributable todeeply discounted or unused capacity. Instead, abandonment wouldonly increase the burden,” Indicated Shippers told FERC [CP00-114].Memphis Light estimates that, if the abandonment is granted,Trunkline customers would face a rate increase of up to 11%.

“…..[T]he fact that Trunkline is not able to extract its fulltariff rates from shippers is not justification for the pipeline toabandon the capacity — capacity that has essentially been paidfor by Trunkline’s shippers — simply in order for Trunkline’saffiliate to benefit economically from a new venture,” producersnoted.

Susan Parker

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